Alabama, Pinellas Park men face prison in digital NFT scam

Federal authorities say the two men, one who was convicted and one who pleaded guilty, schemed to defraud investors.


  • By Louis Llovio
  • | 3:20 p.m. November 1, 2024
  • | 2 Free Articles Remaining!
  • Tampa Bay-Lakeland
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A 21-year-old Alabama man has been convicted in Tampa for money laundering and conspiracy to commit wire fraud in a case centered on NFTs (non-fungible tokens). 

Berman Jerry Nowlin Jr. faces a maximum of five years in prison when he is sentenced Jan. 23. His co-conspirator, 25-year-old Pinellas Park resident Devin Alan Rhoden, pleaded guilty in May and is scheduled to be sentenced Nov. 20.

According to a statement from the U.S. Department of Justice, here is what happened:

Nowlin and Rhoden minted two non-fungible token collections on the Solana blockchain named Undead Apes and Undead Lady Apes.

Nowlin, who also went by the names of Repulse and Zayous, developed the NFTs, managed the blockchain protocol and coded the Solana smart contracts. Rhoden, known as Denny and Deviinz, then marketed them on Discord and X.

(According to the finance website Investopedia, NFTs are assets like a piece of art, digital content or video that have unique identification codes and are stored on a blockchain, while the assets themselves are stored in other places.)

Following each of the original mints the average sale price of the collections increased dramatically. While they were created at the cryptocurrency equivalent of $5, the NFTs just from the UndeadApes collection resold for the equivalent of $360 at their peak.

The Justice Department says that given the initial responses, the pair decided to perpetrate a scheme called a rug pull. This, according to the statement, is “a cryptocurrency investment fraud scheme where developers abandon a project, take investor funds, and leave investors with a worthless asset.”

In April of 2022, they announced a third minting, this one for an NFT collection that would be called Undead Tombstone.

The Justice Department says that in an announcement and later advertisements Nowlin and Rhoden made “exaggerated, misleading, and outright false statements to investors” which included the amount of cryptocurrency that would be reinvested into the project and partnerships with other businesses.

They minted 632 Undead Tombstone NFTs April 19, 2022 “before abruptly terminating the mint and executing the rug pull.” Not long after, they deleted their Discord and Twitter accounts, cutting off all communication with investors.

By that point, the Justice Department says, about $135,000 in cryptocurrency was sent to wallets the pair controlled. Nowlin later moved the money from the Solana blockchain to the Ethereum blockchain, which in the digital world is known as chain-hopping. This is a technique used by cybercriminals and money launderers to make finding ill-gotten funds more difficult.

With the money moved, Nowlin used the cryptocurrency to buy U.S. dollars that went into his personal bank account.

In all, the two men were able to get nearly $400,000 in cryptocurrency from hundreds of victimized investors from the three NFTs, the Justice Department says.

John Dumas, an assistant special agent in charge of Homeland Security Investigations Tampa, says in the statement, the case and the subsequent guilty verdict “should serve as a stark reminder that criminals can easily exploit the allure of digital fortunes through would be cryptocurrency investments.”

The case was investigated by the U.S. Air Force’s Office of Special Investigations; Homeland Security Investigations; the U.S. Department of Defense’s Office of Inspector General Defense Criminal Investigative Service; and the Pasco County Sheriff’s Office.

It was prosecuted by Assistant U.S Attorney Carlton C. Gammons.

 

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Louis Llovio

Louis Llovio is the deputy managing editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.

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